Cabotage and the colonial corset:
The great Australian bind
The Australian Industries Assistance Commission of Inquiry into Coastal
Shipping is merely the latest in a series of commissions of inquiry into the subject.
The author examines the debate on the introduction of the Navigation Act 1912
and concludes that Australia will again adopt "middle of the road" policies
which are not fully supportive of either shipper or shipping interests.
I. IAC INQUIRY
Approbation and immense interest have greeted the recent institution of
an inquiry into Australian coastal shipping by the Industries Assistance
Commission (IAC).' One commentator, convinced that Australian coastal
shipping existed in a state of "scandalous inefficiency" stated that it was
.~
"the first time there has been a proper inquiry into the i n d u ~ t r y " Another
commentator applauded the inquiry but lamented the express exclusion of
. ~ terms of
the waterfront operations from the ambit of the e ~ a m i n a t i o nThe
reference are to conduct an inquiry to "elicit information about the
efficiency of the coastal shipping industry in Australia and its impact on
economic growth and employment within the economy" and produce an
"Information Report". The Commission, operating under this general
"economic" mandate, is directed to consider questions such as cost
structures of operating vessels, competitive forces affecting the industry,
freight charges, the impact of government assistance and regulation on the
operation and cost of services, linkages between the coastal shipping
industries and employment elsewhere in the Australian economy, and any
"other factors" affecting efficiency or competition in coastal hip ping.^ The
scope of the inquiry is, however, restricted by the express exclusion of
waterfront operations and by the requirement that the Commission take
*
1
2
3
4
The author is a PhD candidate at the University of Sydney Faculty of Law. The author
wishes to thank Professor James Crawford for his helpful comments on the paper.
21 July 1987,93/87, reference under s23 of the Industries Assistance Commission Act 1973
by the Minister for Industry, Technology and Commerce. Final Report scheduled for
submission July 1988. [The IAC issued a Draft Report on Coastal Shipping on 27 April 1988;
hearings are scheduled for Sydney and Melbourne in June 1988 - Ed.]
Sydney Morning Herald, Sydney, Australia, 28 December 1987, 10.
Sydney Morning Herald, Sydney, Australia, 31 December 1987, 8.
Supranl.
4
(1988) 5 MLAANZ Journal
into account the fact that the "Government's existing policy is that coastal
trade be carried in Australian controlled and Australian crewed ships,
except where such ships are unavailable or services provided by them are
inadequate."5 The Commission in a discussion paper has articulated its
understanding of the mandate and provided a non-exhaustive list of issues it
considers relevant to the inquiry. The list which has expanded upon the
express requirements set out in the reference includes consideration of the
Navigation Act 1912, the Australian National Line, shore based facilities,
the Tasmanian Freight Equalisation Scheme, and questions of defence and
national security. Not surprisingly with such an ambitious programme, it
has received, and continues to receive, numerous and lengthy submissions
from a wide range of interested par tie^.^ Some of these submissions have
doubtless been prompted by a provocative comment in the discussion paper
which suggests that Much of the criticism of coastal shipping may not accurately reflect the current
situation - for example manning levels on new Australian ships have been reduced
significantly in recent years. Indeed, it may well be that coastal shipping has beenused
as a "scapegoat" for poor business decisions or inadequacies in other areas.'
The Business Council of Australia (BCA), while acknowledging the high
operating cost of the coastal shipping infrastructure, attributed much of the
blame to the cabotage provisions of the Navigation Act 1912 (Part VI). The
Council's submission concludes The virtual complete exclusion of foreign flag vessels from coastal trade has led to a
significant cost impediment to domestic industries' competitivene~s.~
The merits of cabotage, that is restriction of the coastal trade of a nation to
its own vessels, is a subject of long standing economic and legal debate the
world over. In the case of Australia, the IAC inquiry and related discussion
do little more than replicate inquiries and discussions which took place at
5 Ibid.
6 The official deadline for initial submissions was 13 November 1987 at which time 31
submissions had been received. As of 4 January 1988,83 submissions had been received
ranging from 3 to 122 pages in length.
7 "Coastal Shipping" Discussion Paper Industries Assistance Commission, 9 September
1987,5.
8 Submission ro rhe Indusrries Assistance commission Inquiry into Coastal Shipping. December
1987, IAC submission No. 76, 9. Substantially the same position was put forward in a
lengthier study endorsed by the BCA, P Stubbs, Ausrralia and rhe Maritime Indusrnes
(AIDA Research Centre, Australia, 1981), 151. The Australian Mining Industry Council
expressed a similar view in its submission, November 1987.
Strictly speaking the Navigation Act provisions are not on their facecabotage provisions, as
they expressly permit foreign vessel participation. But in fact they operate as such because
all coasting trade vessels are required to comply with high Australian standards for
manning, wages etc. There is however anexpress exclusion under s287 of vessels in receipt,
or receiving or having received in the preceding 12 months a subsidy or bonus from a
government of a country other than Australia.
Cabotage
5
the turn of the century and, if one wished to consider the actual origin of the
problem in Australia, it may be seen that it pre-dates federation to European
settlement. I n short the question of cabotage and coastal shipping policy
has, in one form or another, been before Australian policy makers and
legislators since settlement. The present paper will confine itself to
examination of the legislative origin of the problem in the Navigation Act
1912. It is suggested that current federal policy in favour of a national
mercantile marine while at the same time actively seeking policy input from
shippers is illustrative of its historically schizophrenic approach to shipping
p ~ l i c yThe
. ~ dilemma stems from a combination of Australia's geography
and colonial history. I n terms of economic and legislative policy this has
meant that Australia has been unable to find itself fully supportive of either
shipper or shipping interests and has instead, adopted midway policies
which salve rather than solve the dilemma.
11. COASTAL SHIPPING POLICY TO 1904
Throughout the 1800s the Australian colonies tended to accept British
fiscal and constitutional policies. This altered drastically soon after the turn
of the century and the change was perhaps most evident in relation to
shipping policy and legislation, a subject which incorporated fiscal,
international, and constitutional concerns. Shipping and navigation policy
was one area in which Australia, while following Canada's protectionoriented lead in most areas of economic policy development, had chosen to
continue with the English "free trade" policy. When Canada enacted
legislation in 1870 restricting coastal trade participation, the Australian
colonies did not follow suit, although legislatively competent to do so. As a
result the Australian coasting trade remained open at the turn of the century
to foreign vessels, as provided by the Merchant Shipping (Colonial) Act
1869 (UK).1° Almost total dependence on overseas shipping and lack of
political cohesion between the Australian colonies were the main reasons for
the anomaly.
I n 1900 the six Australian colonies were federated and became the
Commonwealth of Australia. The Commonwealth of Australia Constitu-
9 The federal policy favouring a national mercantile marine is also given expression in the
proposed amendments to the Part X provisions of the Trade Practices Act 1974 which affect
liner shipping services to Australia. A statement from the Minister for Transport and
Communications dated 19 November 1987,41/87 commented "The Government is firmly committed to the development of a competitive Australian
shipping industry."
10 32 Vict c l l .
6
(1988) 5 MLAANZ Journal
tion Act 1900 allocated substantial legislative authority over shipping to the
federal parliament.
Centralisation of legislative authority meant that there was more potential
for developing and implementing policy responsive to national and
international concerns. I n the case of Australia this was quick to manifest
itself in the form of shipping legislation which protected what were
perceived to be, and still remain to this day, the core Australian interests at
the time: trade, defence and labour. Meaney has argued that Australia's
foreign policy can be analysed in terms of a search for security in the Pacific
and, relevant to our present subject, points to the newly formed Commonwealth's concern at the growing "Japanese" threat after 1904 Shortly after Federation a new and much graver threat to Australia's security appeared.
. . Japan had become the dominant power in Asia, and with the withdrawal of British
battleships to meet the German challenge in the North Sea, there was no power left in
the region to place a check on Japanese ambitions. Australia's position now seemed
perilous. Australia was exposed for the first time to the possibility of an invasion . . .
Immediately after the Battle of Tsushima in July 1905 Alfred Deakin . . . called on
Australia to look to its defences.12
Concerns as to security and defence also manifested themselves in a more
general anxiety about the extent of foreign participation in Australian
coastal shipping and Australia's reliance on foreign-owned or controlled
shipping, as well as the employment of non-white crews on "British ships"
operating in the Australian routes.13 The result of this anxiety was,
11 63 & 64 Vict c12, ss 51 and 98. There was at one time a problem regarding inter state
shipping which was believed to be beyond the competence of the federal government. The
case of The Srare of New South Wales v The Commonwealth (Seas and Submerged Lands)
(1985) 135 CLR 337 appears to have clarified the situation in favour of the competence of
the federal government to legislate with respect to the territorial sea. See discussion in
Reporr on ~ u s t r a l i a ~n a r i r i i ~ e ~ i s l a r(1i 976)
o n (Summers Inquiry) which notes that until
this case it was thought that the Commonwealth did not alone have the competence toenact
legislation similar to that in Part I of the Merchant Shipping Act 1894 ( 5 i & 58 Vict c60).
12 N Meaney, "Australia's Foreign Policy: History or Myth" (1969) 23 Australian Outlook,
173 reproduced in N Meaney, Australia and The World. A Documenrary Hisroy from rhe
1870s t o rhe 1970s, (Longman Cheshire, 1985), 37, 38.
13 J Bach, A Maritime History of Australia, (Thomas Nelson, 1976), 436, comments that As Deakin said at the beginning of the century, Australia is, whether or not its citizens
recognize the fact or not, a maritime country; it has always been totally dependent
upon its access to overseas markets.
Bach also notes that between 1870 and 1914 there was a depression in world shipping with
increases in tonnage far outstripping the demand and that many of the foreign vessels were
competing against British ships in the Australian trade with the benefit of government
subsidies, with the result that, according to Australian figures in 1906, United Kingdom
shipping had increased its tonnage in Australia over the preceding years by 41 percent while
Germany had increased by 155 percent over the same period. Bach cites Sir William Lyne
at the 1907 conference (Cd 3523), 328, who commented that When we realize that naval supremacy must largely depend upon mercantile
supremacy,surely this increase of the foreigner at the expense of Britain must make us
pause and consider if all is well.
Cabotage
7
ultimately, legislation. For most of the period between federation and
World War I the newly formed Australian government sought first to
develop the appropriate legislation and then to overcome British and
Australian reluctance to support actions which appeared to jeopardise the
increasingly fragile "Empire" - particularly in the face of military and
commercial aggression from European powers.
In a detailed examination, Burley suggests that The basis of policy since federation simply put, has been the creation of an Australian
mercanrile marine. The policy sprang from two aims. In origin, and in large part, it
reflects the needs of imperial defence in that it was aimed at creating a reserve of trained
Australianseamen for war service. It also stemmed from Australia's preoccupation with
her role in international trade and her concentration on securing low ocean-freight rates
for her expons.14
An economic historian, Dick, has argued recently that concern about the
dominant position of the foreign controlled overseas shipping conferences
on the Australian routes provided the impetus for government intervention.
He comments that In Australia the origins of policy go back to 1901 when, at the time of Federation,
powers over interstate and overseas shipping were among those vested in the new
Commonwealth Government . . . From the outset the Government had two main
concerns, namely, the desirability of an Australian owned mail line to the United
Kingdom and the introduction of a Navigation Act to reserve the coastal trade for ships
manned by Australian crews.15
14 K Burley, British Shipping and Australia 1920-1939, (Cambridge University Press, 1968),
20. (Emphasis added).
15 H. Dick, Plus Ca Change The Evolution of Australian Liner ShippingPolicy, Research Report
87, department of Economics, University of Newcastle 1983,5,6. Dick points out that the
navigation policy was also reflected in the Australian Industries Preservation Act 1906
(Cth) which outlawed restraint of trade, rebates and monopoly, claimed extra territorial
jurisdiction and was intended to apply to overseas liner shipping. The first case tried under
the Act was, however, unsuccessful and the Act not enforced: Huddart Parker & CoPty Ltd
v Moorehead (1909) 8 CLR 330. K. Trace, Australian Overseas Shipping 1900-1960, PhD
dissertation, University of Melbourne, 1967, 43-47, discusses a Royal Commission
appointed by the Government of Western Australia in 1906 which investigated allegations
of excessive freight rates between the United Kingdom and Freemantle and abuses arising
out of the conference system. The Commission concluded that the rates were excessive and
that most of the blame could be laid upon rhe "ring" operating in London which had come
to an agreement with the West Australian Shipping Company on rates. Trace also discusses
the effect of the Australian Industries Preservation Act 1906 and its amendment in 1909to
forbid deferred rebates. He points out that Commonwealth government policy on this was
undermined by the fact that, although the deferred rebate system was forbidden on the
homeward trade, the United Kingdom had not taken similar action in relation to the
outward trade. Although measures requiring information had been implemented the
movement towards monopoly proceeded unabated between 1906 and 1914.
8
(1988) 5 MLAANZ Journal
The Colonial Conference of 1902 was the first at which the Commonwealth of Australia rather than the constituent states was represented.
Despite state protests the Commonwealth was again in 1907the only invited
representative of Australia, a fact which constituted express recognition of
the paramount authority of the Commonwealth in the matters under
consideration at the conferences. l 6 Merchant shipping was not discussed at
any length at the 1902 conference other than by a resolution that the
governments of the colonies would consider the advisability of refusing
coastal trade privileges to countries which reserved their coasting trade.17
111. REPORT OF THE 1904 COMMISSION
In 1904 the Commonwealth government appointed a Commission to
enquire into and make recommendations regarding Australian navigation
16 J C Anderson "Dominion Status" (1930) 8 Can. Bar. Rev. 32,44. The question of which of
the Australian governments has authority and was a "British possession" for .
purposes
of
.
the merchant shipping legislation was and continued to be a matter of dispute. For example,
F L Stow "Maritime Law and Jurisdiction in Australia",. (1904-5)
2 The Commonwealth
.
Law Review 110,157 argued at i59 that if the Commonwealth was "British Possession"
under the Merchant Shipping Act then its legislative power was plenary in the field. Stow
asserted however that the Commonwealth was not a British possession and that the
Navigation Bill proposed by the federal government was to a large extent ultra uires. He
relied in part upon the Interpretation Act 1889 (Imp) and the situation in Canada in
support of the view that in the case of conflict state law would override Commonwealth on
the basis, not of section 109 of the Constitution, but by the Colonial Laws Validity Act,
1865.
But the identity of the Australian States is most distinctly preserved, and the powers
over shipping attributed, by the Constitution, to the central authority are as distinctly
less than those which were possessed by the States.
The Navigation Bill lately introduced into the federal Parliament, is based on an
assumption the direct contrary of the opinion expressed above; for on no other
ground, even with the aid of section V, of the Constitution Act could a large number of
its provisions be upheld.
E Sikk "Commonwealth Legislative Power Over Australian Coastal Shipping" (1955-56)
29 AL J 104 has argued conversely that the Commonwealth government had the power to
regulate all coastal trade by virtue of the combination of section 98 of the Constitution and
section 736 of the Merchant Shipping Act 1894. The author suggests that the Imperial
intention was to give power toa central legislature when it came into existence and exclude
local legislatures. Sikk, however, also advanced the view that this authority was lost when
sections735 and 736 of the Merchant Shipping Act 1894 were repealed with the adoptionof
s5 of the Statute of Westminster Adoption act 1939 (UK).
17 Reproduced in Navigation Laws ofrhe Empire and the Quesrion of Coasral Trade: Precis of
Correspondence, Australian Parliamentary Paper. Report 26, 1907-08, v01 2, 1,
a
Cabotage
legislation.I8The majority report of the Commission identified the issue of
foreign participation in the Australian coastal trade as the most important
placed before them. After noting the practices of various countries, the
report summarised the conflicting opinions on the matter. The summary is
interesting because the crux of the problem now before the IAC Inquiry is
essentially the one considered by the 1904 Commission and resolved, after
lengthy debate, by the enactment of the Navigation Act 1912. The
Commissioners commented on the proposed legislation as follows [We] have been sensible of the national and Imperial responsibilities of the Commonwealth. The matter has been complicated by many. points peculiar both to our
geographical and industrial position, and our relations with the Empire. Many witnesses,
while admitting the desirableness of fostering a mercantile marine, were opposed to any
restriction upon shipping, which might tend to decrease rhefacilities for intercourse and trade
with foreign countries. It was pointed out that we were cut off from the rest of the world
by a wide expanse of ocean, and that our prosperity and industrial progress depended
upon a speedy and economical transport of our produce; that to restrict foreign-going
ships from participating in the coastal trade would tend to drive them away altogether.
Further it was urged that in the case of our Empire. ..It is sufficient for most countries
to consider their relationship with foreigners. With us it is necessary also to consider the
effect of any such conditions upon other parts of the Empire . . . while thoroughly
appreciating the desirableness of differentiating between British and foreign shipping
and having a lively apprehension of the importance of encouraging British, as opposed
to foreign ships, your Commissioners have not been able to recommend a more general
exemption . . . all foreign ships receiving subsidies should be prohibited from
participating in our coastal trade . . . The only realand effective safeguardfor our Empire,
industrially as well as nationally, is the existence of a numerous and efficiently manned
mercantile marine. 19
The minority report exhibited a greater concern for the impact of restriction
on Imperial unity and British shipping and would have characterised the
Royal Cornmissia Report a the Navigation Act, 1904, 1906, Parliamentary Paper No. 30;
Report of the RoyalCommission on the Navigation Bill of the Australian Commonwealth, 1904,
(1904; Cd 3023). The Commission was appointed on 29 June 1904. The report was divided
into two with a majority of 5 and minority of 4. The majority was headed by the Chairman
W Hughes, Minister of State for External Affairs. The minority differed with respect to the
issues of manning, coastal trade provision and, in the case of one commissioner, liner
shipping rebates.
19 Ibid, xxxix-xli. (Emphasis added). The one concern that would seem to be no longer of
relevance is that until 1981 there was no legal entity called an "Australian ship". Strictly
speaking they were British ships of Australian registry. The enactment of the Shipping
Registration Act 1981 (Cth) has corrected this. One of the main problems confronting
Australian legislators was the argument by the United Kingdom that any discriminatory
action taken would reflect on all British ships internationally.
(1988) 5 MLAANZ Journal
issue as one dealt with more properly in the context of British tariff
preferences and by treaty It is a question of Empire policy, with international bearings, a policy liable to
amendment from time to time by arrangement or treaty . . . We would not exclude
British or even foreign vessels from continuous coastal trading if they observe the
conditions imposed on Australian vessels. But we would not attempt to apply these
conditions to vessels, and above all British vessels, which call at ports in Australia at the
beginning or ending of a long overseas voyage, though they may carry some passengers
or cargo between the ports of call.20
IV. REPORT OF THE 1906 ROYAL COMMISSION
In 1906 the Australian government also appointed a Royal Commission
to examine and report on ocean shipping services between the United
Kingdom and Au~tralia.~'
The Commission recommended that the Commonwealth establish a national line of mail steamers to provide a service
between Australia and England, in preference to implementing a subsidy
scheme to assist Australian producers. A number of reasons in support of
such an approach were advanced including the following At present the British Shipping Conference, in which foreign shipping is represented,
regulates the Australian passenger traffic, not specially for the convenience of
Australians, but rather to meet the necessities of its many and varied interests in the East
and elsewhere. But a Commonwealth line, not being embarrassed by these conflicting
interests could concentrate its efforts on giving to passengers to and from England the
best and most convenient services . . .[The] effect of the State running a line of steamers
successfully would be to check any exorbitant charges which might be made by private
carrying companies between here and Europe, and would tend to prevent their
penalizing exporters or importers in any improper way.22
Consideration of the Australian Navigation Bill was deferred by the
British government until a conference in 1907 was specifically devoted to
the issue. Before that conference, correspondence and memoranda were
exchanged as to the legality and appropriateness of the Australian position.
While the motivation for these submissions and exchanges was chiefly
economic, political or sentimental, the discussion was framed as a legal
debate over the meaning of sections 735 and 736 of the Merchant Shipping
Act 1894 (UK) in relation to the developing authority of the colonial
20 Ibid, Ixii-lxv.
21 Appointed 1 1 January 1906, Reporr from rhe Royal Commission on Ocean Shipping Service,
Parliamentary Paper (1906) Vol 111, Part 2, No 36.
22 Ibid, ix, xi.
11
Cabotage
governments, and over the definition of "coasting trade."23Despite judicial
pronouncement which generally supported the position taken by the United
Kingdom correspondents, the matter was to remain a question of debate for
some time.24
23 R R Garran, "Re Jurisdiction" Appendix E, TheRoyal Commission Report on the Navigation
Bill 1904, (1906; Cd 3567) stated the colonial position as follows 12. Section 735 confers a very special legislative power. It empowers a Colonial
Legislature to repeal, as regards the Colony, provisions of the Imperial Act which
extend to the Colony. That is a power which, apart from this provision, no Colonial
~ e ~ i s l a t uwould
re
have. To construe the grant as limiting in any %ay the antecedent
powers of Colonial Legislatures in regard to shipping generally is opposed to all canons of
interpretation.
13. As to section 736, it is not easy to discover either its exact purpose or its exact
effect; though its history, so far as it appears on the Statute-book, affords some
guidance. ..if it is hard to see what it adds to the powers of Colonial Legislatures, it is
at least impossible to regard it as taking anything away. I t is affirmative in form and in
apparent intention; and it cannot be supposed that in the guise of a g i b of power the
Imperial Parliament intended to make a sweeping inroad upon the legislative powers of the
whole of the self-governing Colonies of the Empire.
14. The Merchant Shipping Act 1894 is not expressed to extend, as a whole, to the
whole of the King's Dominions. Certain parts of it are expressed so to extend (eg,
Parts, I, VIII, XIII). Certain other parts are givena limited and specified application
beyond the United Kingdom, whilst other parts contain no general application
clauses at all. Mr Cunliffe, [of the Board of Trade] in his remarks as to the application
of the several parts of the Act, appears to infer, merely from the absence of limiting
words in particular sections, that those sections were intended to apply throughout
the British Dominions. Suchan inference - if it is meant that the sections inquestion
extend to the Colonies within the meaning of the Colonial Laws Validity Act appears to me to be forbidden by the clear terms of that Act. I propose to deal in order
with his remarks as to the application of the several parts .
....
..
23. With regard to the application of the several Parts of the Imperial Act to the British
Dominions generally, it appears to me that the fact of some of the Parts containing a
general application clause raises a strong presumption against the general application of
those Parts in which no such application clause is found and makes the necessity for
"necessary intendmenr"special1y strong to support ageneral application of any sections in
those Parts. No such necessary intendment can be gathered from the fact that some
sections are expressly limited to the United Kingdom, while others are not so limited.
(Emphasis added).
24 See for example Re Reg v Marais: E x Parte Marais (1902) AC 51,54 which dealt with the
possible repugnancy of legislation regarding organisation of a court in Natal. The Privy
Council ruled in favour of Imperial paramountcy under the Colonial Laws Validity Act
1865. This was relied upon by Knox, C J of the High Court of Australia in The Union
Steamship COof New Zealand Ltd v Commonwealth (1925) 36 CLR 130. Union Steamship was
a case which involved the question of whether Australian legislation on employment and
discharge of seafarers applied to a British ship registered in the United Kingdom, trading to
Australia and, if so, whether the legislation was repugnant to the Merchant Shipping Act
1894and inoperativeby reason of the Colonial Laws Validity Act 1865. The court ruled that
the Australian legislation was subject to the operation of the Colonial Laws Validity Act
1865and to the extent of any repugnancy with the Merchant Shipping Acts 1894 and 1906,
void and inoperative. The Commonwealth had argued that the enactment of the
Constitution had repealed pro tanto the earlier general Merchant Shipping Act 1894. Knox,
CJ following Marais, held that -
12
(1988) 5 MLAANZ Journal
V. AUSTRALIAN REACTION TO THE NAVIGATION ACT 1912
In 1907 a Colonial Merchant Shipping Conference was held between
Australia, New Zealand and the United Kingdom to attempt to resolve
difficulties relating to the merchant shipping l e g i s l a t i ~ n .The
~ ~ United
Kingdom representative attempted to distinguish legal and political issues
from questions of authority over merchant shipping, and to confine
discussion at the conference to the latter.26 Despite these efforts to avoid
determining any of the legal questions the conference came to conclusions
which appeared to do just that. For example, in the case of conditions for
crew accommodation or manning levels it was resolved 9 . Vessels ro Which Colonial Condizions are Applicable
That the vessels to which the conditions imposed by the law of Australia or New
Zealand are applicable should be (a) vessels registered in the Colony, while trading
therein, and (b) vessels wherever registered, while trading on the Coast of the Colony,
that for the purpose of this resolution a vessel shall be deemed to trade if she takes on
board cargo or passengers at any port in any Colony to be carried to and landed or
delivered at any port in the Colony.z7
In effect the argument is that the Constitution Act operates as an implied repeal pro
rancoof the Colonial Litws Validiry Act and the Merchanr Shipping Acr 1894. It would
follow, if this contention were correct, that the ColonialLaws Validity Act would have
no application to laws enacted by the legislature of acolony on which a constitution in
the usual form - i.e., giving power to make laws for the peace, order and good
government of the colony -had been conferred by an Act of the Imperial Parliament
passed after 1865. In my opinion the argument for the defendants on this point cannot
be sustained. The Colonial Laws Validity Act is an Act dealing with laws made by
colonial legislatures generally. It assumes the competence of a colonial legislature to
make laws with respect to agiven subject matter, and dealsonly with such provisions
of a law otherwise valid as are repugnant to any Act of the Imperial Parliament or to
any order or regulation made thereunder. I t deals with a specialsubject, and I cansee
nothing to justify a limitation of the plain words "any colonial law" to laws made
under authority given by the Imperial Parliament before the passing of the Act. In my
opinion, the ColonialLaws Validiry Acc applies to laws passed under a power given by
an Imperial Act passed before it. (140).
Issacs, J commented that The Merchanr Shipping Acts 1894 ro 1906 treat merchant shipping as an Imperial
subject. They indicate an endeavour to provide on a national basis for all
contingencies of British mercantile navigation throughout the Empire, partly by
direct enactment and partly by optional local enactment imperially sanctioned (secs.
71 1,735 and 736). But the Acts in one way or another cover the whole subject. (142).
25 Cd 3567.
26 Ibid, 55 1. Lloyd George commentedOne of the most important matters which we shall have to discuss is the question of
the Coasting trade. The only suggestion I make at the present moment is this. There
are legal and treaty questions which may be raised; for my part I would rather leave
those outside if we possibly can, and rather discuss the whole question as practical
men desirous of arriving at some kind of a solution which may be a working solution
between the Mother Country and Her Colonies.
27 Ibid.
Cabotage
13
Following the conference the Commonwealth government despatched
copies of its proposed Navigation Bill 1907 to the Secretary of State.28The
1907 Bill still retained contentious provisions, in particular Part V1
"Coasting Trade" which was said to apply to "all ships (whether British or
foreign)." Coasting trade was defined by clause 279 A ship shzll be deemed to engage in the coasting trade if she takes on board passengers or
cargo at any port in Australia, or any territory under the authority of the Commonwealth, to be carried to, and landed or delivered at, any other port in Australia or in any
such territory.
A special exemption was made in the case of mail-carrying British ships
"until the railways of Western Australia are connected with the railways of
the State of South A~stralia.''2~Foreign ships required a special licence to
participate in the coasting trade. Licences were available only in the case of
vessels which met Australian conditions regarding crew wages and manning
3 ~ Bill generated a
levels, and operated without a government s ~ b s i d y . This
series of written commentaries, mainly from the shipping industry responding to specific provisions in the Bill. Despite an apparent acceptance by the
United Kingdom of Australian authority to legislate, the following
comments in a letter from the Secretary of State to the Governor-General of
Australia in 1908 reveal that the initial premise of Imperial paramountcy
had not altered I t is, of course, impossible for any decision as to the actual powers of the
Commonwealth Parliament to be arrived at except on appeal to a Judicial Tribunal and
His Majesty's Government have no desire to lay stress on any technical argument
derived from the interpretation of statutes; but they think well to explain in some detail
why they consider that it is desirable that the legislation of the Commonwealth Parliament
should be restricted to the re-enactment and adaptation to local circumstances, of provisions
already contained in the Imperial Merchant Shipping Acts, and to independent legislation
for vessels registered in the Commonwealth or engaged in rhe coasting trade of the
Commonwealth. . . It is entirely a matter for the Parliament of the Commonwealth to
decide to what conditions vessels registered in Australia or engaged in the coasting trade
shall be subject, and it is obviously of great advantage thar the Australian Parliament
should apply to local conditions the principles laid down in the Imperial Merchant
Shipping Acts, as regards over-seas ships which are engaged in trading to Australia, but
which are not registered in the Commonwealth, and which do not engage in the
Commonwealth coasting trade . . . But it is most important, in the opinion of His
Majesty's Government, that this regulation should be approximately uniform. . . there
should beno doubt as to what the prevailingBritish standard at any moment i s . . . [Where]
"Imperial and International relacions are involved" . . . your Ministers will, no doubt,
recognise thar the control by the Imperial Government of the legislation of the Commonwealth is not a marter for decision by any court of law.'[
The Commonwealth government consistently maintained its position
and denied the validity of this assumption although compromise was
28
29
30
31
2 October 1907, Cd 3826.
Clause 279.
Clause 281.
Supra n28,593-597, letter 18 September 1908. (Emphasis added).
(1988) 5 MLAANZ Journal
reached on specific issues.32That this debate was not a mere battle between
governmental representatives removed from public view and interest is
illustrated by the extensive newspaper coverage given to the conferences
and the issues discussed above. For example a series of articles was
published at the time of the 1907 Merchant Shipping Conference which
examined the problems confronting the delegates. The writer's view was
summarised as follows -
.
[The writer] confines himself to a general survey of the Imperial problem as a whole, in
so far as it affects the position of the great self-governing colonies of the Empire, and
endeavours from that survey to deduce some general principle, to find some universally
applicable key to the solution of existing difficulties. That key he finds in the
constitutional position of the Colonies. The root of all difficulties, the source of all
friction, is, in his view, a constitutional position which has long ceased to bear any
reasonable correspondence to the actual facts of the situation."
The writer commented on the lack of control and influence Australia had
over foreign policy The only constitutionalmethod by which a nation like the Australian can even express
its views on the question of foreign policy directly affecting its interests is the method
which sufficed for the infant settlement of 70 years ago . . . The really governing forces
must, in the long run prevail: and these governing forces are, to a large extent, the
interest and prejudices of the voters of the United Kingdom . . . Colonial interests and
colonial ambitions are mere disturbing incidents, which are dealt with from a sense of
duty . . . They are apt to be sacrificed . . .34
The situation in Australia was further complicated by the fact of British
dominance and cartelization of many of the coastal shipping companies and
maritime labour unrest. Bach notes that The power to legislate for such discriminatory protection which, under normal
conditions, would deny British shipping participation in the Australian interport trade,
was hotly challenged at several conferences in Britain . . . Overseas owners engaged in
the Australian trade naturally opposed bitterly the proposed legislation . . . The
Australian companies were in a more difficult position; ostensibly the legislation was
offering them, in return for the additional expenditures it would make necessary, a total
monopoly of the coastal trade, free from both British and foreign competition . . .
however, there was shown to be considerable hostility towards the coastal companies,
which were charged with being British-owned or at the least British dominated;
furthermore they were said to be guilty, through their rebate system of exploiting the
interests of coastal shippers for their own and not the general benefit.. .It is interesting
to note that the union adversaries of the owners were also prepared to blame overseas
competition for the local companies' inability to charge higher fares for service along the
coast. The unionists undertook to ensure, by boycotting ships of defaulters, any
agreement the owners might make to charge higher rates. The president of the Seaman's
32 Correspondence Relating to Proposed Legislation of Australia and New Zealand on the Subject
of Merchant Shipping, Cd 4355, Cd 3891.
33 The Times, 9 April 1907.
34 Ibid, 12.
Cabotage
15
Union said that foreigners must be prohibited from taking the bread out of the mouths
of owners, seamen and engineers, preferably by the introduction of a Navigation Act
that would confine the coastal trade to Australian vessels.35
The substance of the Navigation Act, which had for the most part
remained unchanged since it was first proposed, was again disputed at the
colonial conference in 1911.36 It was also agreed at the 1911 conference that
thenceforth, by convention, the United Kingdom would no longer enact
legislation in relation to shipping and navigation which applied automatically to the self-governing D ~ r n i n i o n sThe
. ~ ~ proposed Navigation Bill was
passed in 1912 as the Navigation Act 1912 although the coastal trading
provisions did not, at the request of the United Kingdom government,
become operative until 1921. It has been suggested that even before the
cabotage type restrictions, which in effect operated as a form of flag
discrimination in favour of Australian registered fleets operating the
coasting trade, were implemented, most coastal trade was actually carried
by locally registered fleets (although these fleets may in fact have been
offshoots of the British shipping companies, in particular the Inchcape
group, who rather than competing with locally owned companies acquired
them).38The 1912 Act clearly excluded "unfair competition" from its
coastal trade in that ships in receipt of or under an agreement to receive or
which had received in the preceding 12 months any form of subsidy -direct
or indirect - from any government other than the British government,
35 Bach, opcit 13, 209-215 comments also on the existence of a combine between coastal
shipping companies with 188,000Tsaid to operate in its control and 10,000T of interstate
outside it.
36 One important change had been made in 1910 when the definition of an "Australian trade
ship" was extended under s5 of the Commonwealth of Australia Constitution Act. A B
Keith, Responsible Government in the Dominions, (Oxford Clarendon Press, Oxford, 1912)
Vol 111, 1197, comments that this was in response to a High Court judgment in The
Merchant Shipping Guild ofAustralasia v Archibald Cuwie and CoPry Lrd (1908) 5 CLR 737
which interpreted the scope of s5 of the Australian Constitution to cover ships wherever
registered if their real home was in Australia. Keith assertedThe meaning of this clause would appear to be to extend the legislative powers of the
Commonwealth with regard to merchant shipping not only to registered vessels and
vessels engaged in the coasting trade, but to vessels even if not registered or engaged in
the coasting trade. . .
37 Reporr of the Conference on the Operation of Dominion Legislation and Merchant Shipping
Legislarion, (1929: Cd 3479), 198 stated that Since the year 1911 the practice has been established that enactments of the
Parliament of the United Kingdom in relation to merchant shipping and navigation
have not been made applicable to the Dominions. In general, all shipping legislation
passed by the Parliament of the United Kingdom since that date has been framed so as
not to extend to the Dominions.
38 Burley, op cit, 14, 5-6 discusses this and refers to the 1924 First Report of rhe Royal
Commission on the Navigarion Act, CPP 1923/4 11, 1048, 1116.
16
(1988) 5 MLAANZ Journal
were not permitted to engage in the coasting trade of A ~ s t r a l i aThe
. ~ ~onset
of World War I resulted in deferral of any implementation of the provisions
of the Act until after the War.
I t is interesting that the Act which had proved so politically problematic
and which was viewed as a radical departure from the United Kingdom
legislation and policy, came to be described in 1976 as an attempt to adapt
existing British legislation to Australian conditions The Act as it finally was produced in Australia was very largely based on the British
Merchant Shipping Act 1894. . . When the British Acts and the Australian Navigation
Act were first introduced there were two main purposes for the legislation . . .to provide
seamen with protection from unscrupulous employers [and] to implement safety
measures designed to halt the steep rise in the rate of shipping casualties . . . In many
respects the Navigation Act still reflects British attitudes at the end of the nineteenth
century. As did the British legislation at that time the Navigation Act applied many of
its provisions to the whole of the merchant fleet of the British Empire.40
While issues such as safety and protection of seamen were part of the
rationale for such legislation it seems evident from the discussions and the
provisions themselves that the motivation was, as suggested, essentially
economic. A Report in 1924 of an Australian Royal Commission on the
Navigation Act commented [I]t is necessary to look closely into the reasons why the Parliament, after such
exhaustive consideration, finally placed the Navigation Bill upon the statute-book.
Your Commissioners have studied these reasons, have perused the reports of the Royal
Commission and of the Imperial Shipping Conference, and read every important
speech on the Navigation Bill by Ministers, members of the House of Representatives,
and Senators, with the result that your Commissioners find that rhe main reason which
actuated Parliament in placing the Acr upon the statute-book, and which lifred the subject ro
the plane ofgreat national imporrance above the ordinary considerations of parry politics,
was the desire ro build up an Australian Mercantile Marine. To build up an Australian
Mercantile Marine it was necessary to extend the protective policy of Australia to its
merchant shipping . . . The Australian coastal trade was to be reserved for Australian
owned ships.41
The use of such protective legislation echoed that employed by England
prior to 1849 with the Navigation Acts and, while perhaps out of step with
developments in world shipping and the increasing international nature of
the industry, was appropriate given Australia's stage of constitutional and
national development. Despite Australia's desire to create a mercantile
39 Section 287 (1). This provision has now beenaltered so that all ships in receipt of subsidies
other than from an Australian government are excluded from the coastal trade.
40 Report on Australian Maritime Legislation, produced by M M Summers, (Australian
Government Publishing, 1976), 1-2.
4 1 Reporr ofrheRoyalCommission on the Navigation Act, 1923-1924, Cwlth No 103, Vol2,1019
at 1024-1025. (Emphasis added). The report was split into three reports with a majority of4
and minority of 3. The majority opinion was itself divided in two although agreement was
reached on the final recommendation that the coastal trading provisions of the Navigation
Act be repealed.
Cabotage
17
marine the British legislation remained dominant and Australian owned
vessels were still considered "British ships" registered in Australia. The
1924 majority report concluded that [A]n Australian-owned Mercantile Marine does not exist, nor is it likely to come into
being by reason of the Navigation Act . . . The Navigation Act has so far, therefore,
failed in its purpose. . . [W]e are saddling the whole of Australia with the expense of the
Navigation Act, which benefits a comparatively few seamen, a number of whom have
been attracted to the Australian coastal ships on account of the higher wages . . . [Tlhe
only practical use which the Act has is to prevent foreign shipping in Australian
~aters.4~
The fact of war clarified its relative isolation and the degree of its
dependence on shipping for Australia. A change of national government at
the beginning of the war resulted in the purchase of ships and the creation of
an ultimately unsuccessful state owned shipping line for Australia. Perhaps
the most influential development during the period 1900-1914 was the
articulation of Australia's dilemma regarding the appropriate shipping
interest, that is whether the national interest was better served by the
shipping or the shipper approach. This dilemma remains unresolved, as
policy has been determined in relation to political philosophy rather than
Australian economic realities. A Report on Australian Maritime Legislation in
1976 examined the coasting trade provisions and concluded that there were
three options - (1) to seek the most efficient and least costly carriage of
goods, (2) to completely protect the shipping industry and allow the
economy to absorb the burden, (3) the middle course of preventing unfair
competition. The report essentially concluded that the first two were
politically unacceptable because in practice the trade had been reserved for
many years for Australian manned ships which had been especially built and
registered in Australia for the coasting trade and a change of policy would
meet with considerable opposition from shipowners and unions. The report
acknowledged however that the shipping industry should not be protected
completely from competition but must be given incentive to compete. The
existing middle course with some variation, was recommended as the most
workable.43Given the current policy direction it is unlikely that the IAC
inquiry will be able to respond in a substantially different way. This
conclusion would seem to be borne out by the result of a recent inquiry into
42 Ibid, 1023, 1048. This conclusion reached by the majority is found in the report of the
Chairman, J Prowse, M P and A C Seabrook, M P and was based upon a determination that
most of the Australian coastal shipping was actually owned by British companies and that in
fact the Act worked only to provide them with a monopoly on the coastal trade rather than
strengthening Australian based industry. Arguably the Shipping Registration Act 1981
(Cth) requirements would assist in preventing the situation of overseas ownership.
43 Supra n40, Summers Report, 133-134.
18
(1988) 5 MLAANZ Journal
liner shipping policy in Australia, which also adopted a "middle of the road"
approach, one which attempted to please all interests and consequently
pleased none.44
44 Seminar on Ausrralia's Overseas Liner Shipping, Sydney, June 1986, Papers and Proceedings, Bureau of Transport Economics, 1986. Draft legislation has been prepared on the
basis of this report which provides amendments to the Trade Practices Act 1974. A
governmental statement, supra n9, commented that the major points of the new
arrangements include - strengthening of the rights of shipper bodies in negotiations with shipowners;
- provision for the Trade Practices Commission to investigate complaints made by
shippers or referred by the Minister; and
- provision for complaints of unfair pricing of shipping services to be investigated by the
Trade Practices Tribunal.